Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Chesapeake says natgas market oversupplied, plans to cut output, spending

Published 02/21/2024, 01:03 PM
Updated 02/21/2024, 01:06 PM
© Reuters. FILE PHOTO: A 3D printed oil barrels and oil pump jack are seen in front of displayed Chesapeake Energy logo in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) - Chesapeake Energy (NYSE:CHK) said it would cut spending and natural gas output this year as it sees the market being "oversupplied", causing the company's shares to rise more than 7% on Wednesday.

Gas prices fell 30% this year because a mild winter did not dent storage as much as expected amid lowered heating demand. The weakness was despite an Arctic freeze in January that briefly caused gas demand to soar to a record high. [NGA/]

On a conference call, Chesapeake said the oversupplied gas market led the company it to cut one well each at the Marcellus and Haynesville basins while also reducing capital expenditure guidance by about 20%.

"We would assume that demand would come back in some measured fashion and therefore, we could return production in a measured fashion," Chief Executive Domenic Dell (NYSE:DELL)'Osso said on the call.

"We feel comfortable pausing turn-in lines and slowing completions activity, slowing drilling activity to match that cadence should be considered as we would also be comfortable accelerating those cycle times in the future when needed."

The reduced wells and spending would lead to production falling to 2.7 billion cubic feet per day (bcfd) in 2024, down from around 3.5 bcfd in 2023, Chesapeake said.

However, the company expects better supply-demand fundamentals in the long term, and sees a "step change in demand in 2025 as incremental LNG capacity comes online," along with higher natgas supply domestically.

© Reuters. FILE PHOTO: A 3D printed oil barrels and oil pump jack are seen in front of displayed Chesapeake Energy logo in this illustration taken January 25, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Chesapeake in January agreed to buy smaller rival Southwestern Energy (NYSE:SWN) in an all-stock transaction of $7.4 billion, which was pending approval.

"We can continue to work on things from an integration standpoint. If it (the deal) takes longer, we won't let that distract us in any way. We're well into the work required for a successful integration," Dell'Osso added.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.